Fla. Real Estate Seen Hindering SunTrust Profits

Article excerpt

In a research note issued Wednesday, Kevin Fitzsimmons, an analyst with Sandler O'Neill & Partners LP, lowered his earnings estimates slightly for this year and next for SunTrust, in part because of a "higher assumed pace of credit costs" as a result of exposure in Florida.

Richard Bove, an analyst with Punk, Ziegel & Co., wrote in another note that "pressure on residential real estate may be greater than many believe" in Florida, and that SunTrust's exposure could hurt future earnings.

The analysts weighed in three weeks after the $182 billion-asset Atlanta company lowered its fourth-quarter and full-year earnings. It increased fourth-quarter chargeoffs by $68.8 million and loan-loss provisions by $40 million, because of a previously reported bad commercial loan.

The revised fourth-quarter earnings of $1.39 a share missed the average analyst estimate by 7 cents; the previous earnings met the estimate.

"The company dodged a bullet when it successfully rid itself of a large problem loan," Mr. Bove wrote in a note. "However, despite this fact, there may be a number of small troubling loans that could impact its overall results."

Assessors in Florida are lowering property values, more banks are tightening credit standards, and fewer people are qualifying for loans, he wrote.

"Banks in general are going to have to live with this problem," he said in an interview.

Mr. Fitzsimmons' note was written after a meeting Tuesday with SunTrust's management team. "The company is seeing rising delinquencies in its alt-A mortgage portfolio; however, we view the risk as manageable, given preemptive steps to tighten underwriting" in the third quarter "and a focus on the high end of alt-A market,'' he wrote. …